Monday, 26 October 2015

Wee Blue Book of Errors Part II: Pensions

Neil is an Associate of the Chartered Insurance Institute and blogs on financial services. He offered to deliver a professional's critique of the section in Wings Over Scotland's Wee Blue Book entitled "Pensions" and I'm happy to publish it here. As with all my own blog posts: if I'm notified of any material errors I will be happy to correct and/or offer Neil the opportunity to clarify
As I say in the Live Red White & Blue Book, pensions are a highly complex topic. They need not be, but government tinkering over the ages has made them fantastically complicated. That’s why you can’t legally advise on pensions without being qualified in the UK. There's a very good reasons for this: it stops people who don’t know what they are talking about confusing others on the subject.

It’s a shame the Financial Services & Markets Act doesn’t apply in the circumstances of the Wee Blue Book as, in my professional opinion, it would be ruled illegal for failing the principles of “clear, fair and not misleading”.

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The first paragraph doesn’t get off to a good start:

Pensions are a matter of great concern to many Scots, and as a result the No campaign spends a considerable amount of its time trying to frighten people into believing independence represents a threat to their pension. Yet as with currency, pensions are one of the few aspects of the independence debate about which it IS possible to state the position with certainty.

Before I take this apart, I'll let the Wee Blue Book do it for me. The last line of the Pension section itself refutes the first paragraph:

The idea that a No vote provides either security or certainty over pensions is simply a myth. Nobody can say what the next government England elects will do.

This cuts both ways so the converse must be true. The idea that a Yes vote provides either security or certainty over pensions is simply a myth. Nobody can say what a government in an independent Scotland will do. It’s likely that Stu was tired - or more likely confused - when he wrote this last line; it completely contradicts the certainty that he set up at the beginning. For the record I agree with the latter sentiment.

There is no certainty over pensions in an independent Scotland other than the uncomfortable reality that we know with confidence that UK pensions would end on independence. The reason we can say this with such certainty is that both sides agree on this position.

The Scottish Government published a very good paper (> Pensions in an Independent Scotland) a full year before the referendum. In this they clearly set out the priorities for pensions and how they would operate in an independent Scotland.

The Scottish Government were unambiguous: existing pensioners in receipt of a UK State Pension and those currently accruing a UK State pension would - after independence - receive a Scottish State Pension paid for by the Scottish Government rather than the UK Government.

It's there in back & white: the UK State Pension ends and moves to the Scottish Government. What makes this worse is I know Stu knew this because we have had conversations about it at the time.

Conclusion : Factually inaccurate - the UK pension would have ended on independence.

The Wee Blue Book then goes on to try and substantiate the certainty of UK pensions with evidence which is at best limited. It opens with a highly selective quotation from Ian Davidson:

For example, Labour MP Ian Davidson, chair of the Scottish Affairs Select Committee, made these comments in the House Of Commons in May 2014:

“The state pension of any individual in Scotland, in the event of separation, would not be adversely affected [...] they would continue to get the level of state pension, the same as everyone else in the UK… people themselves can be assured that their pensions are secure.”

This was followed by a report from Steve Webb’s evidence to the Committee:

State pensions would still be paid after independence, a UK minister has told MPs, despite concerns raised by the Better Together campaign. Giving evidence to the Scottish Affairs Select Committee, Lib Dem pensions minister Steve Webb said that anybody who had paid UK national insurance would be entitled to their state pension whatever the outcome of the referendum. The intervention contradicts concerns raised by former Labour Chancellor Alistair Darling, the leader of the Better Together campaign.

This is consistent with Stu’s usual style - he's being selective with the facts to try and avoid the awkward reality that these quotes were specifically in the context of the right to a pension which an individual would accrue. Ian Davidson clearly stated in his opening remarks that they wanted to talk about rights “as distinct of who is paying for it”. This important qualification seems to have been missed from the Wee Blue Book.

Furthermore Steve Webb’s evidence is very clear in his written evidence to the Committee on the subject of who is paying for pensions and the threat that independence posed to them. In this Webb states very clearly:

“I would think the Scottish people would expect their Government to take on full responsibility for paying pensions to people in Scotland including where liabilities had arisen before independence. Similarly people in the rest of the UK would not be expecting to guarantee or underwrite the pension of those living in what would then have become a separate country. The security and sustainability of pensions being paid to people in Scotland would, therefore, depend on the ability of Scottish tax payers to fund them.”

Again this vital piece of information is missing - readers of the Wee Blue Book are denied the opportunity to see that there is a clear and real risk to their pensions.

Finally in this section Stu goes on to muddy the waters with references to the DWP letters on the subject of pensions:

And in any event the facts had been well established long before then, with the Department for Work and Pensions having made a similar statement in January 2013:“If Scotland does become independent this will have no effect on your State Pension, you will continue to receive it just as you do at present. Anyone who is in receipt or entitled to claim State Pension can still receive this when they live abroad. If this is a European country or a country where Britain has a reciprocal agreement they will continue to receive annual increases as if they stayed in Britain."

This yet again misses the key point about rights of the individual: what matter is who those rights are against (i.e. -who is picking up the tab, the Scottish or rUK government?).

The DWP letters were carefully worded; after all it was not for the civil service to comment on who would be administering or paying for pensions in an independent Scotland. These replies were designed to reassure voters without straying into politics, sadly this gave people like Stu the opportunity to wilfully misinterpret them to contradict the mutual position of the UK and Scottish Governments.

Conclusion : Factually inaccurate - and certainly fails the “clear, fair and not misleading" test: all Scottish pensions would have depended on the Scottish Government’s ability to pay

Stu’s claims about private pensions demonstrate nothing more than his limited knowledge on the topic. Whilst the cynic in me thinks that this was deliberate, it is more likely ignorance.

Private workplace pensions are the only area of uncertainty. EU rules impose funding requirements on pensions operating across national borders, which would apply to any UK-wide scheme.

However, there are numerous options available to circumvent this problem, the simplest of which is for the firms operating the scheme to set up a Scottish office and handle the Scottish and rUK sides separately. The decision as to which solution to adopt will be one for each company to make individually. Unfortunately it’s simply not possible to answer generically or in advance.

There are indeed numerous options available to firms available to deal with cross border schemes but they are all complex and expensive.

The “simplest” is not to split the schemes setting up separate ones for each region - especially if the schemes were in deficit i.e. the value of the scheme was lower than the cost of future benefits guaranteed by the scheme (quite common and, within reason, nothing in itself to worry about). The reason for this is that a cross-border scheme would need to be fully funded (i.e. the value of assets must be brought up to equal the benefits) and that could cripple a number of employers, leading to the scheme closure.

Stu’s solution of setting up a new scheme in Scotland omits this crucial fact: it would have to be fully funded. The likely consequence (if the employer couldn’t afford to close the deficit) would be that at least the Scottish part of the scheme would be closed. As has happened in the past, it is likely that many employers would use the opportunity of change as an excuse to end their final salary (gold plated) pension schemes.

Conclusion : Fails the “clear, fair and not misleading" test: independence would likely place huge pressure on private cross border final salary schemes, presenting members with risk but no beneficial upside.
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40 comments:

You and Kev could work through the whole thing together. That would be even more impressive, and would humiliate the RevStu even further. And of course because it's worth pointing out as many flaws in the Rev's so-called "work" as possible.

Have you thought of offering to have a televised debate (as in a camera set up in the corner of a room and recorded, with the video then uploaded to Youtube) with the supposed Rev Stuart Campbell of the Wings Over Scotland Website?

If he truly believes what he writes and spreads arouund the Internet and he isn't just a fully financed (by the SNP membership, including the SNP hierarchy through anonymous donations) political lobbyist and propagandist, then he should surely be willing to debate the facts with you face to face, whereby a refusal for him to do so, would show to his followers, that he doesn’t believe a single word of his own rhetoric either.

Please continue the good work Kevin, you and your blog are a beacon of sanity in a sea of nationalist spin, deflection and a whole lot worse.

"Max Bennie said... You and Kev could work through the whole thing together. That would be even more impressive, and would humiliate the RevStu even further. And of course because it's worth pointing out as many flaws in the Rev's so-called "work" as possible."===================================================================================I'm sure Kevin or Neil may answer themselves but i doubt either of them are particularly that bothered about "trying to embarrass the pretend Reverend", he does that amply himself without any help. I think they do what they do to debunk and correct the misinformation that Scots may have made decisions on and may be continuing to make those flawed decisions on , surely Scots have a right to make their decisions on factually correct information rather than information that Stu knows very well is wrong as he has been picked up on many of these for many many months now and has still ntt corrected the faults in those writings (some would say rentings) that he offers as "factual advice" in the Public domain. Particularly worrying is the number of SNP Politicians that have been both using the flawed Wee Blue Book themselves as well as deliberately guiding others to it for factual advice on their own social media accounts. A stunning display of poor Governmental governance i'd say but where getting Votes seems to matter, misleading people by SNP Politicians appears to be widespread , whether this is deliberate or is a sign of ignorance of the facts and therefore surely unfit to be in Public Office is another question that should be getting asked. Why do people still address him as "Rev" and play his game when he very clearly is not ?

"Particularly worrying is the number of SNP Politicians" - just what do we expect of these people operating well beyond their pay grade? With due respect to the many hard-working elected Council officials which there must be, I gain the distinct impression the SNP must have been dredging the bottom of the barrel for a number of their chosen representatives, whose only experience of government prior to election has been working in some council,or as hacks for nationalist-supporting tabloids: strong on spin and rhetoric, low to non-existent on logical thinking for themselves. Embarrassment doesn't quite cover the emotion I feel whenever I witness one of their shambolic performances in either Westminster or Holyrood.

V good work of explication from each of you: and by such scrupulous methods, further clear exposure of unfounded, false claims and deliberately misleading positions.

It strikes me that one small, significant indicator of the difference between honest presentation on the one hand, and disingenuous misrepresentation on the other, is the openness with which one side is prepared to admit possibility of error, a willingness to listen and correct if necessary. And with such acknowledgement, a certain winning humanity of approach.

I would say this should not be understood as any sign of weakness, either of personality or argument - rather it bears witness to a greater strength in both.

Whereas I've yet to see any hint of concession of fallibility from the Wee Blue Booker. Though - as indicated here, exposing a mere tip of an iceberg looming for the unwary - there is a rich abundance of faults & errors in the prolific mythology of Scottish superiority that wings its way from Bath, Somerset.

By pure chance i came across another coupe, of blogs taking Stus WBB apart

"Is this a knock down argument in favour of voting No. Of course not: there is nothing wrong in making a short term economic sacrifice for the hope of longer term benefits or for political goals. But that is not the SNP’s case, and it is not what they are telling the Scottish people. Is this deception deliberate? I suspect it is more the delusions of people who want something so much they cast aside all doubts and problems. This is certainly the impression I get from reading a lot of literature as I researched this post. The arguments in the Wee Blue Book are exactly that: no sustained economic argument, but just a collection of random quotes and debating points to make a problem go away. When the future fiscal position is raised, we are so often told about the past. I too think past North Sea oil was squandered, but grievance does not put money into a future Scottish government’s coffers. I read that forecasting the future is too uncertain, from people who I am sure think about their future income when planning their personal spending. I read about how economists are always disagreeing, when in this case they are pretty united. (Of course you can always find a few who think otherwise, just as you can find one or two who think austerity is expansionary.)"

I am well aware of Simon Wren-Lewis's fine blog, though had never come across the other one you mentioned. It is interesting that Wren-Lewis is a strong critic of the current Tory economic policies. So is Paul Krugman, who has also criticised the Scottish independence plans. It's almost like they know something about macroeconomics, and their opinion should never be discounted!

So a Scot who's paid his dues to the UK treasury for the last 50 years prior to the referendum would find him/herself in the position where their future pension on independence would be the sole concern of the Scottish government?

Your assertion is that there would be no fiscal transfer from London to Edinburgh in order to compensate for the decades worth of contributions Scots had made to ensure they had a pension on retirement?

Basically London gets off Scot free, while the SNP have to find the cash down the back of a sofa in Bute House!

Just a minute, I accept that "payment of that pension" would transfer to the Scottish government, but that is not the same as saying that the funds to make those payments would also be Edinburgh's concern. To get a full pension one needs to have paid 35 years of NI, which I will have done next year. My pension will then be paid by the government in London, no matter where I live. The fact that an independent Scotland may administer that payment is neither here nor there.

That seems to be confirmed in the second paragraph that you quoted, where it is stated that working age people will receive their pension based on contributions to the UK fund, and the Scottish one that would kick in on independence day. So a man who has made 15 years of British NI contributions, would get almost half his pension via a payment transfer from London, with the rest being made up from the Scottish fund, and the whole lot administered from Edinburgh.

@ Anonymous 07:34 and Ken Ball 10:18I think that you both misunderstand the nature of the state pension system in the UK. You appear to believe that your contributions (National Insurance) have gone into some mega-pension investment fund, much like a giant private pension pot. Nationalists either expect 'their share' of this imaginary pot to be handed over after independence, or for the UK government to pay back their pre-independence contributions in the form of future cross-border pension payments.

In reality we are all paying for the previous generation of older people who are now retired and drawing their state pension. Their pension comes out of current receipts that the Treasury accrues from NI and other taxes. There is no huge fund to draw money from; your NI contributions have already been spent paying for those retired in Scotland and elsewhere.

Therefore you have no personal or Scottish fund to be paid back via a transfer to the Edinburgh finance ministry - you will have to rely on people younger than yourselves, living in Scotland, to cough up for your future state pension.

Given Scotland's unfavourable demographics (a shortage of younger people, many of whom leave to make careers elsewhere and a growing proportion of older people already drawing pensions), Scotland has a significantly worse problem than the rest of the UK in this respect.

It also means that if independence occurs the Scottish government will be entirely responsible for raising the taxes or gathering NI to pay for its own pension system. What has happened in the past, where the whole UK contributed, is irrelevant and has no bearing on future pension payments. It will be entirely an issue for Edinburgh; those living in Scotland at independence will have no claim on pension payments from their foreign neighbours south of the border. Sorry.

@ Anonymous 07:34 and Ken Ball 10:18I think that you both misunderstand the nature of the state pension system in the UK. You appear to believe that your contributions (National Insurance) have gone into some mega-pension investment fund, much like a giant private pension system. Nationalists either expect 'their share' of this imaginary pot to be handed over after independence, or for the UK government to pay back their pre-independence contributions in the form of cross-border pension payments.

In reality we are all paying for the previous generation of older people who are now retired and drawing the state pension. Their pension comes out of current receipts that the Treasury accrues from NI and other taxes. There is no huge fund to draw money from; your NI contributions have already been spent paying for those retired in Scotland and elsewhere.

Therefore you have no personal fund to be paid back via a transfer to the Edinburgh finance ministry - you will have to rely on people younger than yourselves, living in Scotland, to cough up for your future state pension.

Given Scotland's unfavourable demographics (a shortage of younger people, many of whom leave to make careers elsewhere and a growing proportion of older people already drawing pensions), Scotland has a significantly worse problem than the rest of the UK in this respect.

It also means that if independence occurs the Scottish government will be entirely responsible for raising the taxes or gathering NI to pay for its own pension system. What has happened in the past, where the whole UK contributed, is irrelevant and has no bearing on future pension payments. It will be entirely an issue for Edinburgh; those living in Scotland at independence will have no claim on pension payments from their foreign neighbours south of the border. Sorry.

To Anonymous just above and Ken, I believe you may be confused about how state pensions work. No-one paying NI is paying into their own (future) pension pot; everybody's payments are used to fund the entitlements of current pensioners. I pay NI to fund state pension payments being made today, tomorrow when I retire the workforce's NI contributions will then be paying for my state pension. NI contributions go out almost as fast as they come in. So there is no pot, no bulging purse down in London stuffed with the NI contributions of Scots workers or anyone else, and so no need for a fiscal transfer. What would happen under independence is that this system simply transfers the Scottish elements of this system to Scotland. NI contributions received by the Scottish government would be used to fund Scotland's pension entitlements, which (entitlements) would remain unchanged. This is entirely as it should be, and as far as I can see has been agreed in principle by the Scottish government some time ago.

To be fair, I think the noises coming from the various governments prior to the referendum were contradictory and confused. So the Scottish Select Committee MP in the video clip did say state pension levels were secure after independence. This was later contradicted (incorrectly reported by Wee Blue Book) by Steve Webb the Pensions Minister in his written statement, that undoubtedly had a Pro-No agenda. The Scottish Government report did say the Scottish Government would pay the pension of those resident in Scotland but on my understanding were (no doubt deliberately) vague about how they would be funded.

The truth of the matter is that the arrangements would be hammered out as part of the separation agreement. I think in Czechoslovakia the split was done on the location of your employer. This meant that Czech retirees of firms that were located in Slovakia would get lower pensions than their neighbours, even though they themselves may never have lived in Slovakia. There was a court case about this recently.

Not great from a Better Together perspective. However, if like the Yes campaign you set out to prove that everything was going to carry on as before, that confusion and doubt will go against you.

I think the various Anon contributors have correctly stated the position on independence: that existing pensioner obligations including those currently in payment would transfer to the Scottish Government. This is entirely in line with Steve Webb's written evidence which I highlighted in the blog and in line with the Scottish Government's statement that all pensions would become the responsibility of the Scottish Government. This is also in line with the Scottish Government's budget for independence which assumed no windfall of payments from rUK in respect of previously UK citizens now living in an independent Scotland.

Ironically for the Wee Blue Book Author wrote a post about the windfall eluded to by Anon at 10:18 http://wingsoverscotland.com/the-pensioner-jackpot/ in this Stu states that a indepdent Scotland would be quids in because the UK would apparently pay all pensions to rUK citizens (despite the evidence from Steve Webb which he knew about).

Of course if the Scottish Government agreed with that view they would have factored in day one pension costs which were substantially lower than the current costs (as they would be paid by rUK not the Scottish Government). And yet they didn’t.

Their budget assumed that they would take on the full cost of existing pension provision from day one, entirely in line with the explicit statement made in their pensions paper. This mathematically disproves the baseless assertion by Anon 10:18.

Whilst some nats wish to pretend the set up of public pensions on a pay as you go basis (that is payments from existing workers fund the benefits of existing pensioners) is some kind of dreadful Westminster scheme its worth bearing in mind that the big Scottish public service pensions (NHS, Teachers) are funded on the same basis and were proposed to continue on that basis by the SNP in their pensions paper. Furthermore the establishment of a pay as you go basis for pensions just after the Second World War meant that the war generation was afforded an immediate pension rather than waiting a generation for it to be delivered. From an economic point of view such pay as you go transfer payments are more efficient provided the population remain broadly in line over time and setting aside money in individual pots creates friction costs that only benefit bureaucrats rather than pensioners.

Anyone arguing that the arrangement is unfair to Scotland must first explain why they would have deprived the war generations of a rightful pension following the hardships of Great Wars.

Including my last comment I would direct you to the following from the UK minister responsible. I know it is in the blog post but clearly it bears worth repeating.

“I would think the Scottish people would expect their Government to take on full responsibility for paying pensions to people in Scotland including where liabilities had arisen before independence."

There is no question of the rUK government funding pension obligations of Scottish citizens who may well have paid NI contributions but they have gone on to support existing rUK and Scottish pensioners at that moment in time.

Fails the “clear, fair and not misleading" test:There is NO UK pension fund, the NI contribution has already been spent.Scotland pays its share of pensions in Tax current account.It would be NO different after Independence.

I'm fully aware that NI is a giant Ponzi scheme, but that is not the point. Neither is the point made by a government minister that he expects that Scots will want their new state to take over all responsibility all that important - it's just some scummy Tory giving it mouth.

What is important is that the argument put forward by the Scottish government and quoted by this here blog does not actually say what the author claims it does.

I'm sorry but quite clearly the first two quotes from the wbb you posted do not contradict each other. I haven't read the book and perhaps you are correct and have just selected the wrong quotes to illustrate your point. However with the first quote the author appears to be setting up a premise that the processes and transitions re pensions in the event of a yes vote were robust. In the second quote he states that the uk government could change pension policy post referendum, which of course they could, as could an independent Scottish government.

These statements in isolation do not contradict each other.

I stress I refer not to the case either side makes, only to a failing of logic in your presentation. This is worrying however as it undermines the credibility of the entire article

FFAll I would note is that if you watch the video clip right at the start Davidson explicitly removes the question of who was paying for pensions, i think without this qualification the statements would have taken a very different at the committee. In any case as we can see the UK position on payment was set out later in his written evidence and this was also in line with the Scottish Government’s paper on pensions and their post independence published budgets.

You are right about the fact much would come down to negotiations but the Scottish Government would not have any credibility taking any other position that they pay for all Scottish pensions (including those in payment) seeing as they have already states this in their pensions paper and allocated provisions for it in their budget.

Anon 16:23Sorry you are wrong here current NI contributions are directly used to fund the state pension, after independence Scottish NI contributions to the Scottish Government would fund existing Scottish pensioners, including those in payment right now. That is a substantial change from the current position and by definition ends the UK State Pension in Scotland. Your conclusion is incorrect and I think demonstrated you don’t understand the argument.

Ken BellThe government minister was speaking on behalf of the UK Government setting out the UK position. This would be the primary position in the event of independence negotiations, furthermore as the Scottish Government explicitly noted that they would be taking responsibility for all Scottish pensions, including those in payment it is clear both sides agree. Unless you have a different definition of responsibility Ken.

Unfortunately the Scottish Government’s position is also set out in the Scottish Government budget for independence where the costs for existing pensions are specifically allocated to the Scottish Government without any flow from the UK Government.

You may be looking to find some wiggle room from the Scottish Government but it doesn’t exist, they accepted they would be taking on the costs of all pensions because that’s what responsibility means.

Finally you may think Steve Webb is a “scummy Tory” but he’s a Liberal Democrat, that may make him still “scummy” in your view but if you are going to use insults to make your point at least get it right.

Anon 17:28

I don’t accept your statement that the two sentences don’t contradict one another. On a simply logical point “state the position with certainty” is directly contradicted by “the idea that a No vote provides either security of certainty”. This is worrying and undermines the credibility of your entire comment.

I could leave it there but perhaps in your case some more context in needed which I’m happy to oblige. For a start I would also suggest that you read the full wings article.

The first sentence clearly notes the No campaign “frightening people” that “scare story” was in respect of the UK State Pension ending for Scots. It then goes on to say that there is certainty by quoting selected evidence to imply that the state pension was secure and guaranteed by the UK government. It then goes on to explicitly say that the UK State Pensions were “safe”.

This is blatantly contradicted by the final sentence as you cannot have a pension that is “safe" and then go on to say it can be changed at any time by the government.

Thanks. When I say that the Scottish Government deliberately avoided discussing funding - on my understanding - I think that was to avoid raising doubt in voters' minds about whether pensions would be be fully funded at all, rather than because they were disguising their true position on how the pensions would be funded. It's possible they hadn't actually worked out their expected funding mechanism. They allocated the same proportion of expenditure on pensions payments as the UK government. But that was their general principle in the White Paper. For example they would allocate the same percentage of expenditure on Defence, even though a Scottish Defence Force would clearly be a different beast from the UK one. Incidentally the fact they weren't intending to reduce defence expenditure puts the lie to the "bairns, not bombs" rhetoric, but that's another topic.

"As with state pension liabilities, Mr. Webb also raised the problem of disentangling or disaggregating public sector pension liabilities in the event of separation. This could lead to problems in determining which state—the continuing UK or Scotland—would be liable for paying out: If I am a member of the civil service, whether I work ... in Dundee or in Burnley does not matter—I am building up the same rights. We may not even know, for example, where somebody was when they did the work, if they are in a UK-wide scheme [...] The difficult thing to disentangle would not principally be the level of the pension right you had already built up—we have a figure for that; it would be who pays the bill. That would be the source of endless negotiation and take years to disentangle.

Nowhere in any discussion I've read on the subject of pensions in an independent Scotland have I come across a statement which specifically states that the Scottish Government will shoulder in it's entirety the fiscal burden for the state pensions of Scots. Steve Webb's comment above confirms what I've always thought, and that is every Scot of working age in employment has been paying his/her dues to the UK treasury in order to ensure they have a pension on retirement. Regardless of how Westminster has chosen to fund current pensions (in the worst possible manner as usual)the liabilities must rest with them.

It is ludicrous to suggest that the newly fledged independent Scottish government would have to pick up the tab from day one, which is why I think Steve Webb quite rightly states above that pensions would be "a source of endless negotitaion".If the financial burden for pensions was Scotland's from day one (as this blog claims) there would be no need for negotiations about "who pays the bill"! He may have been specifically talking about public pensions in the quote above but he is also on record (BBC) as stating virtually the same in regards to state pensions.

@Anonymous 03:39 It is clear that responsibility for the state pension will transfer to Edinburgh in the event of independence. In the case of public sector employees there might well have to be government-government negotiations, although I have a suspicion that London would make a couple of very minor PR concessions before effectively giving the Edinburgh government full responsibility for all state employees resident in Scotland. After all, it can simply decline to pay pensions to any public servant living in an independent Scotland - and what can anyone do about that?

Indeed, why should they? These public servants have chosen to live and work in Scotland and will presumably be transferred to the rapidly expanding Scottish public sector (as a result of all the new civil service departments thrown up by independence). Public sector pensions are just like state ones. They are funded out of current tax receipts, not through a large pension pot or central investment fund. So why would Edinburgh not be happy to take responsibility? If you want the gain of independence be prepared to share the pain of paying for it.

What I find more intriguing is the way in which countless comments by pro-independent bloggers and supporters see the issue of screwing money out of the rest of the UK as central to their case for 'freedom'. This pensions debate is a case in point

Their view seems to go:

1. We are not paying for anything that happened before year zero.

2. The fall in the price of oil is just a blip. It is Scotland's oil and we should have exclusive claims to all tax revenue, although of course we also expected to benefit from discovery in English sectors of the North Sea too (via the Barnett formula).

3. We are not responsible for any part of the national debt (because Scotland has never in any way benefitted from that debt, not even that caused by paying for World War II). Scotland will start life without any debts, leaving the UK to pick up the bill for everything.

4. We will ignore all the money the UK has poured into Scotland (e,g, infrastructure like the new Forth Bridge, Scottish Parliament building or, God help us, the Edinburgh tram system).

5. We will complain bitterly about having had to contribute to any UK-wide infrastructure project, defence spending, etc.

6. The UK should go on paying Scots via pensions, wind farm subsidies, etc on an indefinite basis. After all they had our oil revenue taxes and whisky export duty in the past and this is just compensation.

7. We should actively seek to undermine the UK economy by reducing corporation tax, airport tax etc. They are our business rivals.

8. We will remove Trident and other UK military bases at short notice, without any financial compensation, but should expect the UK to go on building their warships on Clydeside to our vast profit.

9. Without Scotland the UK economy will be seriously damaged, its foreign trade severely reduced, its balance of trade badly affected, the pound will decline - and we should revel in the spectacle of the mighty in reduced circumstances. Serves them right.

10. Scotland will use the pound sterling (actually originally an English currency, not a British one) because 'it is Scotland's pound too'. The UK will be forced into an undesired currency union until we dump the pound a few years later in favour of the Euro, groat, bawbee or whatever. Stuff the damage the pound will suffer on the foreign exchange markets, because Scotland will then have a new currency.

11. Nevertheless, Scotland will continue to have a close and friendly relationship with the UK and our trade will have free access to our benefit, despite the well-known financial impact of borders.

12. Any continuing issues between the countries can be balanced by the UK paying an independent Scotland yet more money in compensation for 300 years of colonial exploitation and suppression.

13. North Sea oil and gas will cover any remaining financial shortfalls, not least when the secret fields come on tap and the price goes up to $110/barrel again.

14. We are not paying for anything that happened before year zero. That is the job of the UK (i.e. the English).

Traditionally the image of the mean, grasping Scots and their obsession with (other people's) money was something of an old music hall joke south of the border, but nationalists appear to be doing their best to make it a reality, as we have seen with some of the comments about pensions.

Nationalism is a very two-edged sword and pro-independence supporters should be careful what they wish for; the consequences are likely to be somewhat different from the assumed nirvana of a debt-free and heavily subsidised Scotland.

Anonymous 3:39 your statement seems to be conflating public sector pensions with state pensions. The two are entirely different things. While resolving any division of responsibility for public sector pension payments may well be more complex and take time to settle, the matter of state pensions (the subject of this discussion) could be dealt with comparatively simply and speedily.

Anon, 05:28. Indeed. I think in any post-yes vote negotiations, a lot of Scots would be astonished that everything didn't go their way. When they didn't, many Scots would tell themselves they had been betrayed by the English. They would not realise (or pretend not to realise) that the rUK government had to negotiate hard, just as the Scottish government did.

See Prof. Alex Russell's column in City AM regarding the oil price fall for an example of this entitled way of thinking.

I think you would have a point if that was the case but IF they were receiving UK funding for Scottish pensions, as has been eluded by some nats with zero evidence or rational, then they would still have allocated the expenditure but they would have noted the receipt of additional income. My point is that additional income from the UK government is not there nor is there any note that it would be expected.

The Scottish Government did not expect to receive income from the UK to pay existing pensions largely because it was such a wildly absurd assumption that not even the cow towed Scottish Civil Services would have let it through.

Anonymous said… 03:39

You’ll note that the very report you quote is the one which is explicit that Scotland would be paying existing pensions from day one. You seem to forget that when the UK is split up Scotland takes its share of financial assets as well as the geographic assets of Scotland but also a share of the UK financial obligations such as debt and debt to pensioners amassed by the UK.

Another way of looking at this is just simply to say that Scotland takes its share of pension obligations (as the Scottish Government said it would) and it can also take a share of the assets built up by the UK to cover those obligations. That of course would nothing as a share of zero (assets) is still zero.

Getting frankly hysterical in your comment won’t get away from the uncomfortable reality that Scotland would be in the same place as the UK in this respect that from day one of an independent Scotland and rUK they would both be responsible for paying their pensioners from their current national insurance income with no backing assets.

The issue of public sector pensions is more complicated as Steve Webb says as a member could have drifted between Scotland and England over the period and this could make the issue of assigning pensioners between the two nation states much more complicated. This is because varying rights to pensions would have been built up over long periods of time. It is also complicated by the fact that some public service schemes are funded rather than pay as you go like the state pension. Therefore there would be the question of the division of assets with such schemes.

This is far more complicated than the state pension where both sides agreed that the split would take place on a geographical basis at the point of independence.

At the end of the day you are right to note that this would all come down to negotiations but there is no credible position to be taken from an assumption that rUK would do an independent Scotland a solid favour by having rUK taxpayers funding both rUK pensioners and Scottish ones. You might as well be arguing that rUK would enable an independent Scotland to walk away without taking any debt. Good luck getting either of those positions though the House of Commons.

I would suggest you watch the Scottish Affairs committee meeting of Tuesday 6th May 2014 from 14:43:00 onwards when Steve Webb was grilled by various MPs on the subject of state pensions

When he was asked "if someone (in an independent Scotland) wanted to keep their UK citizenship, does that have any impact on their pension or is their pension purely determined by where they work?"

He replied:

So at the moment the only thing that determines how much pension you get is how much national insurance (NI) you've paid in, so you don't have to be British to get a British pension, you could be anything. If you pay British NI you satisfy the minimum contribution rules you get a pension from the UK government whether you're a UK citizen or not so citizenship doesn't matter from the point of view in paying pensions."

When Ian Davidson said he wished to seek clarification on a couple of points.

In answering those points (specifically from 14:47:40 onwards) Webb states:

"Clearly, as I said you don't have to be a UK citizen to get a UK pension, so we will obviously for the people who have put NI into our system we would pay them a pension wherever they lived so seperation wouldn't affect that, but what happened post seperation would be a matter for the Scottish government."

When grilled further by Davidson who was clearly aghast at the dawning reality of what he was being told that Scots had aquired pension rights which the UK government were liable for, Webb replied:

"Just to stress, we're talking about state pensions only...people have built up a right wherever they retire to in respect of service for as long as they are paying into the UK NI system.

When questioned further on the matter he basically said that Scots had an aquired right which they had "banked" by paying into the UK NI system.

In the least hysterical manner I can manage to convey the point, it would seem given the partial transcript of the select committee above, that the wee blue book was absolutely right in its assertions regarding state pensions and your "analysis" of it is absolutely wrong on every level.

The UK government is liable for the payment of state pensions for every Scot up until the date of independence and that liabilty is due to every Scot who has paid into the UK NI system in decreasing increments from 35 years down to 1 with the Scottish government being responsible in ever increasing increments again from the date of independence. In esssence the UK governments obligations only end when the last (now independent)Scot who has paid into its NI system has shuffled of his or her mortal coil.

Again you are confusing rights to a pension with payment of the pension. There is nothing in your analysis which covers this. There is a reason for this as Davidson excluded it from the questions from which you quote.

Everyone agrees that NI contributions earn you a right to a pension (although you will note that Webb says that he has been advised by his lawyers not to talk about rights) the question is after Indy is that delivered and paid for by rUK or Scotland.

The SG clearly believe it is them. Hence why they say responsibility and have no budget saving for not having to make these payments. That is a clear cut care.

The UK also believe that it is the Scottish Government post independence as we can see if Webb's written evidence. Furthermore you can see it in the video you quote. When explicitly asked my Davidson if this meant that all the liabilities and assets for pension rights would remain with rUK Webb said "No No"

https://vine.co/v/e3MbrYeJQJO

Additionally Webb was at pains to state time and time again that the question was who was paying for the pensions post Indy and again you have conveniently missed this.

https://vine.co/v/e3MXla3Y1wu

I understand that this is not the answer you want and that you can't bear the thought of Wings being exposed once again. But asserting in the face of the plain evidence in front of you just makes you look and sound hysterical both on here and on Twitter.

Anon, just to add to Neil's point, the amount we pay in NI over the years only determines the state pension to which we should be entitled when we retire. That is all it does. It is not creating a real (or even a notional) sum of money in a pensions pot, since all state pensions are directly paid out of the government's current NI receipts. Every NI contribution payment anyone makes is immediately being used to pay someone else's state pension, we don’t “put into” our own state pension at all. Nor is this a scheme by which the UK somehow gets rich at Scotland’s expense, which seems to be the implication of your comments. The working generation is paying for the retired generation, whether in Scotland or the UK as a whole. So, within the UK's overall state pension scheme, if we drew an imaginary line around just Scotland's NI contributions paid in and just Scotland's pensions paid out, you would find that Scotland's pensioners are already in broad terms being paid from Scotland's NI payments, right now. All that would happen in the case of independence is that the imaginary line would become a real one. The Scottish government has agreed that entitlements would remain as before, and that it would take over responsibility for making payments to Scotland’s pensioners from Scotland's NI contributions. In such a current-account scheme there are no residual obligations on rUK of any sort beyond seeing that the handover of the relevant elements of a working financial system from one government to another goes smoothly - compared to many of the start-up issues of independence this one could hardly be simpler.

I'm confusing nothing, although you are certainly attempting to confuse matters by trying to pass off two severely clipped video excerpts of that meeting which removes all context of what Webb was saying.

For the avoidance of doubt I would urge anyone following this discussion to watch the complete exchange (link below) between Webb and the Scottish Affairs Committee panel of MPs. Having done so I'm confident that like me they'll be astonished at the sophistry being used here by you in an attempt to shore up your rapidly crumbling argument as to who will pay the state pension of Scots if we were an independent country

1) You do not have to be a British citizen to get a UK state pension, all thats's required is that you've paid NI contributions.

2) Scots or Brits who've retired abroad never to return to these shores are paid a UK state pension based on their NI contributions. That would apply equally to a Scot living in an Independent Scotland because as Webb states:

"Inevitably with all these things there's a bit of...who knows exactly what would happen. But my presumption would be that, because they paid into the UK NI system prior to separation they've built up a set of...my lawyers always tell me not to call them rights...but a set of service which under our rules converts into a pension under the rules prevailing at the point they draw it. That is...they've banked that because of their national insurance contributions to the UK system."

3) It becomes indisputably clear on watching the complete exchange rather than your 'clipped video' that the UK has a liability to pay a pension to all Scots living in an Independent Scotland based on their contributions to NI. The only dispute over who pays concerns those Scots still in work, and in that case it quite clearly becomes a shared liability post independence. That liability would increase for the Scottish government for each year past independence day, and obviously decrease for the UK until the point had been reached where the liability was entirely that of Scot Gov.

As for your last paragraph above. You're quite correct in sying that your post is not the answer I want. Why? Simply because it is devoid of truth and full of deceit. That being the case, Wings has nothing to worry about as the only thing being exposed here is the bottom of the barrel you continue to scrape at in desperate attempt to deflect from the harsh reality that you are wrong.

Your self aggrindizement both here and on Twitter won't alter that fact!

Trouble for Anon (who is actually @valeman_ on Twitter) is that he's asserting a point about the UK being financially liable for Scots pensions but his point was explicitly contradicted by his own witness (later in writing) and specifically in the video evidence that he refers to. In a desperate attempt to try to grab any level of dignity from this exchange he's now resorting to just making up assertions. It's not very edifying but given his approach on Twitter it's sadly not surprising.

@Anon 09:43What I find fascinating is the way that commenters like yourself and others above seem to feel that Scotland should be a fully independent country, yet want the rest of the UK to go on paying for you decades after independence day, through pensions, energy subsdies and writing off your share of the national debt.

Does this mean that you all, deep down, doubt Scotland's ability to function without a continuing long-term UK financial subsidy? I can respect those who say that they want independence regardless of the financial consequences, even knowing that it will impact severely on the prosperity and standard of living of Scotland (although good luck getting a Yes vote on that prospectus).

What I find small-minded, sanctimonious and hypocritical about so many Scottish nationalists is that they want 'independence', but only on the basis that the UK (or more precisely England) goes on paying and paying and paying.

I think deep down there is a belief that if everything goes tits up in future, the fact that the population will still have British passports (i.e dual nationality) will mean that good old London will rescue you. If Scotland goes it must stand on its own and should simply accept that there will be some heavy costs and unexpected and unpleasant consequences. It cannot be a pensioner and subsidy junkie, courtesy of the English taxpayer

In reality the UK has the high cards. It can simply refuse to pay out on pensions or anything else and force nationalists to accept independence on London's terms. Big boys' games, big boys' rules. Get used to it, because after independence you would see a lot more of such behaviour.

Valeman, you are making a leap of false logic. Yes, Scots would have built up pension entitlements - all of us do as we pay NI contributions, that is undeniable and no-one disputes it. But those entitlements only define what state pension we should receive when we retire, they represent no more than the basis for an arithmetical calculation. We are NOT building up our own pensions when we pay into NI, we are paying for the pensions of others. So there is no long-term obligation at work here, as you seem to believe should exist; all that would happen under independence is that the Scottish NI income and Scottish pension payments would be ring-fenced and administered the same way but in Scotland for Scots. That part is so logical that all sides agree on it. And it is hard to see why any proponent of independence - which I assume you are - would want it otherwise.

Given that the state pension scheme is effectively net neutral and funded on a current rather than capital basis, no-one gains from NI contributions except the state pensioners of the day. If contributions all went into a big "rainy day" fund things would be different, but they don't. The UK as a whole is not somehow gaining from the NI contributions of Scots, any more than Scots are gaining from the NI contributions of the UK. So there is no lifetime obligation at work here in either direction, however you choose to interpret the videos. Sorry to disappoint you.

ValemanI can only say if you are not confused then you are simply lying. I’ve tried to give you the benefit of the doubt that you were upset and confused but it looks more like you are hoping to lie your way out of this one.

I too would urge everyone to watch the complete exchange and in particular Valerman I would urge you to do so as your inability to understand the concept that are being discussed has moved from charming ignorance to outright deceit.

So let’s go through the facts once more.

Webb states very clearly that you earn a pension (not the legal right to one) through your NI contributions. Of that I think we all agree.

At no point in the video does Webb say that the continuing UK will pay pensions to Scottish pensioners post independence. You say that he explicitly says this when you say “that would equally apply to a Scot Living in an Independent Scotland”. However he doesn’t say this he simply states the position which is beyond doubt that you pay your NI you earn your pension. The question of who is paying for that pension is a matter for negotiations as is clarified by Webb specifically in the video a few seconds later.

You also state that it becomes “indisputably clear” that they are talking about only those still in work. I’m sorry that is just an outright lie. It does not become indisputably clear that this is the case, infant the opposite arises.

When your specific point is put (following the quote you give) that the UK would be paying for all pensions post independence Davidson, who thought that Webb may have been saying something along the lines of your assertion, queries it with him noting “that this is something new”. He then presses him to explicitly note if this means the assets and liabilities of all pensions like with the continuing UK. Webb replied “No” and notes that this would be a matter for negotiations.

That’s the trouble with your attempt at challenge here, you are specifically clipping the quotation and the discussion when your own point has been contradicted a matter of seconds later. It’s shameless and a deliberate attempt to deceive.

Furthermore as I’ve shown you already, in writing, when Webb is discussing the actual question of payment itself (and the only time in this set of evidence that he does discuss it) he is very clear.

I wonder if you doubt what he said in writing? This flies entirely in the face of your assertion. Is your case that Webb said one thing to the committee and then said something completely different in writing and you are the only person to have noticed this?

Why also if your assertion is correct does the Scottish Government take the same position (that they take over responsibility for pensions payment and funding those payments) in their budget and the pension paper.

It’s not as if there is any room for doubt here, the very point you make is directly contradicted by the person you are citing (in writing and in the video itself) and by the the Scottish Government.

Most people at this stage would accept that they are wrong but your continual attempt to put the same point over and over again in the light of directly contradictory evidence. It just shows that you have clearly set out to lie about this.

People like yourself have a lot to worry about if you hope to convince others on the basis of outright lies. However I’m really not sure what your endgame is here. You’ve made a single assertion and have blatantly ignored that it’s been specifically contradicted by your star witness twice in the video and in writing. It’s also been contradicted by the Scottish government.

I really don’t see how you think it is reasonable to continue to make the point in the face of this evidence. Maybe if you had explicit evidence or a reference to Webb saying that the continuing UK would PAY for all Scottish Pensions you would have a case for the video evidence being contradictory. But you can’t give that explicit evidence because it doesn’t exist.

instead you are reduced to making more and more hysterical assertions based on nothing other than your desire to stop Wings Scotland being exposed as a someone who tried to lead many up the garden path on pensions.

Unfortunately for you and Stuart Campbell people like me who actually understand pensions and who have debated pensions with Steve Webb (yes that’s right unlike you I’ve actually talked to your star witness) know when we are reading copy from people who clearly do not know what they are talking about.

I have read most of the comments in this blog & Rev Stu is no financial advisor, also all of this would have to be negotiated AFTER a YES vote. Also the SNP would just refer us to the Edinburgh agreement.